Persistence of dynamic efficiency in Farrell models

Abstract

This article focuses on productivity transitions from low to high levels of efficiency over time in the framework of the Farrell efficiency model. This transition probability approach is applied in two empirical applications in order to test the persistence of Farrell efficiency over time. The first application involves the efficiency comparisons in the public sector, while the second in the private sector. Both applications appear to exhibit a high degree of efficiency persistence over time.